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Novocure Reports First Quarter 2017 Financial Results and Provides Company Update

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Novocure (NASDAQ:NVCR) today reported financial results for the three
months ended March 31, 2017, highlighting year-over-year and sequential
growth in active patients and net revenues. Novocure is an oncology
company developing a profoundly different approach to cancer treatment
utilizing a proprietary therapy called TTFields, the use of electric
fields tuned to specific frequencies to disrupt solid tumor cancer cell
division.

First quarter 2017 highlights include:

 
Three months ended March 31,
  2017       2016       % Change
 
Non-financial
Prescriptions received in period(1) 894 755 18%
Active patients at period end(2) 1,266 797 59%
 
Financial, in millions
Net revenues $ 34.9 $ 13.1 167%
Net loss $ (18.0 ) $ (35.4 ) 49%
 
Cash and cash equivalents at the end of period $ 84.6 $ 115.9
Short-term investments at the end of period $ 104.7 $ 119.8
(1)   A "prescription received" is a commercial order for Optune that is
received from a physician certified to treat patients with Optune
for a patient not previously on Optune. Orders to renew or extend
treatment are not included in this total.
(2) An "active patient" is a patient who is on Optune under a commercial
prescription order as of the measurement date, including patients
who may be on a temporary break from treatment and who plan to
resume treatment in less than 60 days.

"Our growth continued in the first quarter 2017. It was the ninth
consecutive quarter of active patient growth since the first
presentation of our EF-14 data in newly diagnosed glioblastoma (GBM). At
the end of the quarter, we had more than 1,260 active patients on
therapy," said Asaf Danziger, Novocure's Chief Executive Officer. "Our
167% year-over-year revenue growth was driven by an expanding global
base of active patients as well as coverage and contracting success in
the U.S."

"We are pleased with the progress we made this quarter and remain
committed to bringing Optune to all the patients who may benefit from
it," continued Mr. Danziger. "The final analyses of our EF-14 phase 3
pivotal trial presented at AACR showed a consistent improvement in
overall survival when Optune was added to standard temozolomide
chemotherapy for the treatment of newly diagnosed GBM. The improvement
in overall survival was maintained at two, three, four and five years.
The four and five year survival rates of Optune-treated patients were
more than double those of patients treated with temozolomide alone. We
believe that Optune plus temozolomide is an essential combination
treatment for patients with newly diagnosed GBM."

"Beyond GBM, our data continue to support that TTFields may be well
suited for combination with standard of care treatments for a variety of
additional solid tumor types," said William Doyle, Novocure's Executive
Chairman. "As committed as we are to bringing Optune to patients with
GBM, we are equally focused on advancing TTFields for additional solid
tumor indications."

First Quarter 2017 Operating Statistics and Financial Update

There were 1,266 active patients on Optune at March 31, 2017, an
increase of 469 active patients, or 59 percent, compared to March 31,
2016. The increase in active patients was driven both by prescription
growth and by an increase in the percentage of newly diagnosed GBM
patients who started Optune in prior periods and who typically have a
longer duration of treatment with Optune. In the first quarter 2017,
more than 55 percent of Optune prescriptions were for newly diagnosed
GBM.

  • In the United States, there were 933 active patients on Optune at
    March 31, 2017, an increase of 234 active patients, or 33 percent,
    compared to March 31, 2016.
  • In Germany and other EMEA markets, there were 331 active patients on
    Optune at March 31, 2017, an increase of 233 active patients, or 238
    percent, compared to March 31, 2016.

Additionally, 894 prescriptions were received in the quarter ended March
31, 2017, an increase of 139 prescriptions, or 18 percent, compared to
the same period in 2016. The increase in prescriptions was driven
primarily by commercial activities in our currently active markets.

  • In the United States, 685 prescriptions were received in the quarter
    ended March 31, 2017, an increase of 1 prescription compared to the
    same period in 2016.
  • In Germany and other EMEA markets, 206 prescriptions were received in
    the quarter ended March 31, 2017, an increase of 135 prescriptions, or
    190 percent, compared to the same period in 2016.
  • In Japan, there were 3 prescriptions received in the quarter ended
    March 31, 2017.

We continued to work with payers in the United States to expand coverage
of Optune for the treatment of both newly diagnosed and recurrent GBM.
As of March 31, 2017, payers administering plans for more than 187
million lives had issued positive coverage policies stating that Optune
is approved for the treatment of newly diagnosed or recurrent GBM, an
increase of approximately 7 million lives since January 1, 2017,
including new policies with Highmark Blue Cross Blue Shield, Blue Cross
Blue Shield of Idaho, and Dean Health Plan.

For the three months ended March 31, 2017, net revenues increased to
$34.9 million compared to $13.1 million for the same period in 2016,
representing 167 percent growth. This growth was primarily driven by
increased Optune adoption and the transition to accrual-based revenue
recognition for a portion of our billings.

For the three months ended March 31, 2017, net revenues included $14.7
million in accrual-based net revenues. For the three months ended March
31, 2017, gross billings totaled $73.2 million, and 23% of first quarter
2017 gross billings qualified for accrual-based net revenue recognition.
We continue to recognize revenue on a cash basis for payers with which
we do not have contractual arrangements or sufficient history to
reliably estimate their individual payment patterns and for which we
cannot reliably estimate the amount that would ultimately be collected.
We believe there will be an extended period of time during which our
revenue will be a mix of cash-based and accrual-based revenue.

For the three months ended March 31, 2017, cost of revenues increased to
$11.7 million compared to $8.0 million for the same period in 2016,
representing an increase of 46 percent. This was primarily driven by an
increase in active Optune patients, resulting in increased transducer
array shipments and increased field equipment depreciation expenses, as
well as increased personnel costs to establish infrastructure necessary
to support an increasing volume of shipments to patients.

Research, development and clinical trials expenses for the three months
ended March 31, 2017, were $9.4 million compared to $11.4 million for
the same period in 2016, representing a decline of 18 percent. This was
primarily due to a decrease in clinical trial expenses resulting from
the conclusion of our EF-14 phase 3 pivotal trial in newly diagnosed GBM.

Sales and marketing expenses for the three months ended March 31, 2017,
were $14.8 million compared to $13.3 million for the same period in
2016, representing an increase of 11 percent. This was primarily due to
increased personnel costs, reflecting our expanding commercial
operations in the U.S. and Germany, partially offset by a decrease in
advertising and professional services related to the launch of Optune
for newly diagnosed GBM.

General and administrative expenses for the three months ended March 31,
2017, were $12.4 million, representing an increase of 1 percent compared
to the same period in 2016. This was primarily due to increased
headcount partially offset by a decrease in professional services and
other expenses.

Personnel costs for the three months ended March 31, 2017, included $4.6
million in non-cash share-based compensation expenses, comprised of $0.1
million in cost of revenues; $0.9 million in research, development and
clinical trials; $0.7 million in sales and marketing; and $2.9 million
in general and administrative expenses. Total non-cash share-based
compensation expenses for the first quarter 2016 were $5.5 million.

Net losses for the three months ended March 31, 2017, were $18.0 million
compared to net losses of $35.4 million for the same period in 2016.

At March 31, 2017, we had $84.6 million in cash and cash equivalents and
$104.7 million in short-term investments, for a total balance of $189.3
million in cash, cash equivalents and short-term investments. At March
31, 2017, we had $100.0 million of principal indebtedness outstanding
under our Loan and Security Agreement with Biopharma Secured Investments
III Holdings Cayman LP.

Anticipated clinical milestones

Trial initiations:

  • Phase 3 pivotal trial in locally advanced pancreatic cancer (2H 2017)
  • Phase 3 pivotal trial in recurrent ovarian cancer (2018)

Top-line data readouts:

  • Phase 2 pilot STELLAR trial in mesothelioma (2018)
  • Phase 3 pivotal METIS trial in brain metastases (2020)
  • Phase 3 pivotal LUNAR trial in non-small cell lung cancer (2021)

Conference call details

Novocure will host a conference call and webcast
to discuss first quarter 2017 financial results today, Thursday, April
27, at 8 a.m. EDT. Analysts and investors can participate in the
conference call by dialing (855) 442-6895 for domestic callers and (509)
960-9037 for international callers, using the conference ID 92568023.
The webcast can be accessed live from the Investor Relations page of
Novocure's website, www.novocure.com/investor-relations/,
and will available for replay for at least 14 days following the call.

The earnings slides presented during the webcast and the corporate
presentation can also be accessed from the Investor Relations page of
Novocure's website, www.novocure.com/investor-relations/.

About Novocure

Novocure is an oncology company developing a profoundly different cancer
treatment centered on a proprietary therapy called TTFields, the use of
electric fields tuned to specific frequencies to disrupt solid tumor
cancer cell division. Novocure's commercialized product, Optune, is
approved for the treatment of adult patients with glioblastoma. Novocure
has built a commercial organization and launched Optune for the
treatment of GBM in the United States, Germany, Switzerland and Japan,
referred to as Novocure's currently active markets. Novocure has ongoing
or completed clinical trials investigating TTFields in brain metastases,
non-small cell lung cancer, pancreatic cancer, ovarian cancer and
mesothelioma.

Headquartered in Jersey, Novocure has U.S. operations in Portsmouth, New
Hampshire, Malvern, Pennsylvania, and New York City. Additionally, the
company has offices in Germany, Switzerland and Japan, and a research
center in Israel. For additional information about the company, please
visit www.novocure.com
or follow us at www.twitter.com/novocure.

Forward-Looking Statements

In addition to historical facts or statements of current condition, this
press release may contain forward-looking statements. Forward-looking
statements provide Novocure's current expectations or forecasts of
future events. These may include statements regarding anticipated
scientific progress on its research programs, development of potential
products, interpretation of clinical results, prospects for regulatory
approval, manufacturing development and capabilities, market prospects
for its products, and other statements regarding matters that are not
historical facts. You may identify some of these forward-looking
statements by the use of words in the statements such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe" or other
words and terms of similar meaning. Novocure's performance and financial
results could differ materially from those reflected in these
forward-looking statements due to general financial, economic,
regulatory and political conditions as well as more specific risks and
uncertainties facing Novocure such as those set forth in its Annual
Report on Form 10-K filed on February 23, 2017, with the U.S. Securities
and Exchange Commission. Given these risks and uncertainties, any or all
of these forward-looking statements may prove to be incorrect.
Therefore, you should not rely on any such factors or forward-looking
statements. Furthermore, Novocure does not intend to update publicly any
forward-looking statement, except as required by law. Any
forward-looking statements herein speak only as of the date hereof. The
Private Securities Litigation Reform Act of 1995 permits this discussion.

   
Consolidated Statements of Operations

USD in thousands (except share and per share data)

 

Three months ended
March 31,

Year
ended
December 31,

2017   2016 2016
Unaudited Audited
Net revenues $ 34,880 $ 13,053 $ 82,888
Cost of revenues 11,664 7,982 39,870
Impairment of field equipment   -     -     6,412  
 
Gross profit   23,216     5,071     36,606  
 
Operating costs and expenses:
Research, development and clinical trials 9,411 11,445 41,467
Sales and marketing 14,756 13,308 59,449
General and administrative   12,422     12,256     51,007  
 
Total operating costs and expenses   36,589     37,009     151,923  
 
Operating loss (13,373 ) (31,938 ) (115,317 )
Financial expenses, net   (2,446 )   (549 )   (6,147 )
 
Loss before income tax expense (15,819 ) (32,487 ) (121,464 )
Income tax expense   2,226     2,950     10,381  
 
Net loss $ (18,045 ) $ (35,437 ) $ (131,845 )
 
Basic and diluted net loss per ordinary share $ (0.21 ) $ (0.42 ) $ (1.54 )
 

Weighted average number of ordinary shares used in computing basic
and diluted net loss per share

  87,452,983     84,397,164     85,558,448  
     
Consolidated Balance Sheets

USD in thousands (except share data)

 
March 31, December 31,
2017 2016
Unaudited Audited
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 84,587 $ 99,780
Short-term investments 104,664 119,854
Restricted cash 1,536 267
Trade receivables 11,825 6,339
Receivables and prepaid expenses 14,899 10,084
Inventories   25,949   25,549
Total current assets   243,460   261,873
 
LONG-TERM ASSETS:
Property and equipment, net 10,039 9,812
Field equipment, net 9,278 8,808
Severance pay fund 95 88
Other long-term assets   1,756   1,500
Total long-term assets   21,168   20,208
 
TOTAL ASSETS $ 264,628 $ 282,081
   
Consolidated Balance Sheets

USD in thousands (except share data)

 
March 31, December 31,
2017 2016
Unaudited Audited
LIABILITIES AND SHAREHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Trade payables $ 14,799 $ 18,356
Other payables and accrued expenses   17,116     18,526  
Total current liabilities   31,915     36,882  
 
LONG-TERM LIABILITIES:
Long-term loan, net of discount and issuance costs 96,492 96,231
Employee benefit liabilities 2,756 2,590
Other long-term liabilities   4,565     4,033  
Total long-term liabilities   103,813     102,854  
 
TOTAL LIABILITIES   135,728     139,736  
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY:
Share capital - - -

Ordinary shares no par value, unlimited shares authorized; issued
and outstanding: 88,133,366 shares and 87,066,446 shares at March
31, 2017 (unaudited) and December 31, 2016, respectively

Additional paid-in capital 669,462 664,154
Accumulated other comprehensive loss (1,921 ) (1,883 )
Accumulated deficit   (538,641 )   (519,926 )
Total shareholders' equity   128,900     142,345  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 264,628   $ 282,081  

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